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Gold - Weekly Buy Signal

By: GE Christenson | Monday, February 11, 2013
Gold

The weekly stochastic and TDI indicators produced a "buy-signal" in the gold market (and various ETFs for gold) in January 2013. The most profitable "buy signals" occurred when the TDI was low and gold had just finished a large percentage correction, such as in late 2008. The January 2013 "buy signal" is similar to the "buy-signal" from 2008. Within the trend channel that stretches back to 2005, there is room for gold to move higher toward $3,500 per ounce within the next two years. Gold probably will not rally that high in 2013, but new highs above $1,900 seem very likely, based on gold's price history, the current "buy-signal," and the financial traumas in the world that will cause additional "money printing" and consumer price inflation.


The Detailed Analysis

Question: What do February 2005, June 2005, October 2006, July 2007, September 2008, November 2008, December 2011, June 2012, and January of 2013 have in common?

Answer: They represented significant price lows in gold AND those lows were confirmed by the weekly stochastic (14,3,3) indicator and the weekly TDI Trade Signal Line (13,5) as shown in the following chart of gold prices since 2005. Note the green circles showing price lows and corresponding turns in the stochastic and TDI indicators from oversold levels.

Gold 2005-2015
Larger Image

The ten year chart of gold prices is plotted on a logarithmic scale and shows an exponential increase in prices over that ten year period. Note the higher trend line extends to approximately $3,500 by the end of 2014. Prediction - Certainly Not! Possibility - Yes! Jim Sinclair targets a gold price of $3,500 on its way to much higher prices.

The highs in 2006, 2008, and 2011 reached that trend line. A price of $720 in 2006 was just as extreme as the $1,900 price in 2011 and a possible $3,500 price within the next two years. Will gold prices spike that high? Time will tell, but before you dismiss such a price as unlikely, consider the following:

So is $3,500 gold possible? The better question is "How soon will we see $3,500 gold?"


Details Of The Graphical Analysis


Conclusion

The weekly stochastic and TDI indicators produced a "buy-signal" in the gold market (and various ETFs for gold) in January 2013. The most profitable "buy signals" occurred when the TDI was low and gold had just finished a large percentage correction, such as in late 2008. The January 2013 "buy signal" is similar to the "buy-signal" from 2008. Within the trend channel that stretches back to 2005, there is room for gold to move higher toward $3,500 per ounce within the next two years. Gold probably will not rally that high in 2013, but new highs above $1,900 seem very likely, based on gold's price history, the current "buy-signal," and the financial traumas in the world that will cause additional "money printing" and consumer price inflation.

Read Ten Steps to Safety and Why Buy Gold?.

Now look at the above graph of gold again and ask yourself:

 

Author: GE Christenson

GE Christenson aka Deviant Investor
www.deviantinvestor.com

GE Christenson

I am a retired accountant and business manager who has 30 years of experience studying markets, investing, and trading futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me about timing markets, risk management, government created inflation, and market crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs using both fundamental and technical analysis. I offer opinions and commentary, but not investment advice.

Years ago I did graduate work in physics (all but dissertation) so I strongly believe in analysis, objective facts, and rational decisions based on hard data. I currently live in Texas with my wife. Previously, I spent 20 years in Barrow, Alaska, the northernmost community in the United States, 330 miles north of the Arctic Circle.

Copyright © 2012-2014 GE Christenson